Do investors in Green Bond market pay a premium? Global evidence

We examine the pricing difference of Green Bonds (GB) and conventional bonds (CBs) in capital markets worldwide. Credit spread is used to observe whether investors would like to pay a premium for GBs over CBs. This study uses panel data regression with hybrid model to analyse daily observations over the period 2016 to 2017. We employ Option-Adjusted spread (OAS) to measure the credit spreads of bonds while controlling for bond specific, macroeconomic and global factors that influence the spread. With the hybrid model used in the panel data analysis, we were able to capture the fixed-effects of variables in a random effect model. We find that GBs are traded at a premium of 63 basis points (BPS), compared with a comparable corporate bond issue. We find that the green label provides issuers an incentive to raise funds through issuing GBs while providing investors an opportunity to diversify their investments returns. Our findings provide several implications to the major stakeholders driving the GB market to scale up the market to finance the required level of global green investment needs. We stress an urgent need to support the growth of the GB market to achieve sustainable development through mitigating climate change challenges.

Abbreviation GB: Green Bond; CB: Conventional Bond; YS: Yield Spread; BPS: Basis Points; OAS: Option-Adjusted Spread; PCSE: Panels Corrected Standard Errors; CPI: Consumer Price Index; GBPs: Green Bond Principles; CBS: Climate Bond Standard     

Book Reviews

Leon A. Mears, The New Rice Economy of Indonesia, Yogyakarta: Gadjah Mada University Press, 1981, pp. xxiii + 605. Price US$15.

Alfian, Mely G. Tan, Selo Soemardjan (eds). Kemirkinan Struktural: Suatu Bunga Rampai (Structural Poverty: A Collection). Jakarta: Yayasan Ilmu-Ilmu Sosial (YIIS), 1980. pp. 189. Rp 2000.

Thee Kian Wie, Pemerataan- Kemiskinan- Ketimpangan (Equalization-Poverty-Uneven Distribution), Jakarta: Sinar Harapan. 1981, pp. 152. Rp 1750.

Bulletin Leknns, Year 1 No. 2, Feb. 1982, Special Edition on Employment Opportunity, Poverty and Population Mobility in Rural Areas, pp. 146.

Mubyarto (ed.), Growth and Equity in Indonesian Agricultural Development, Jakarta: Yayasan Agro Ekonomika, 1982. pp. xv + 258.

Muriel Charras, De la forêt malefique à I'herbe divine [From Malign Jungle to Divine Grain]: La transmigration en Indonesie: Les Balinais a Sulawesi, Paris: Editions de la Maison des sciences de I'homme 1982, pp, viii + 341. Price Fr. 90.00.

Yujiro Hayami and Masao Kikuchi. Asian Village Economy at the Crossroads: An Economic Approach to Institutional Change, Tokyo: University of Tokyo Press, 1981, pp. xvi + 275. Yen 4000. Geoffrey B. Hainsworth (ed.), Village-level Modernization in Southeast Asia: The Political Economy of Rice and Water. Vancouver: University of British Columbia Press. 1982. pp. ix + 411. Can$34.00.

Colin MacAndrews and Chia Lin-Sien (eds.). Too Rapid Rural Development: Perceptions and Perspectives from Southeast Asia, Athens: University of Ohio Press, pp. xiv + 369. Cloth $19.95, paper $10.95.

Gary E. Hansen (ed.), Agricultural and Rural Development in Indonesia, Boulder, Colorado: Westview Press, 1981, pp. xiv + 312.

William L. Collier, Declining Labour Absorption (1878 to 1980) in Javanese Rice Production, Bogor: Agro-economic Survey, Rural Dynamics Study, Publication No. 2, 1980, pp. 120.     

Will India Be the Next China? Challenges,Prospects and Implications for Australia

India's recent growth performance has been impressive and it appears set to again become a major global economic power. But, sustaining this growth poses formidable challenges. Australia stands to gain much from India's growth. In this article, we review recent developments in the Indian economy, identify policy challenges and discuss short‐to‐medium term prospects, noting some of the main similarities and differences between China and India. Then, we look at opportunities for significant growth in Australian–Indian economic links and policy implications including the possible role of a free trade agreement.     

Third world strategies for regulating drug advertising and marketing

In the pharmaceutical area, third world countries have been particularly subjected to excessive pricing and manipulative marketing practices by multinational corporations. Sri Lanka has gained some experience in curbing abuses by establishing a State Pharmaceuticals Corporation. It has been able to achieve substantial price cuts for pharmaceuticals and to adapt to changing economic and political circumstances. The control of advertising and marketing practices remains a problem but has been tackled in Sri Lanka by an Act of 1980. Until similar laws are enacted greater attention should be given to the individual patient by doctors becoming more circumspect in prescribing drugs.

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Strategien der Länder der Dritten Welt zur Regulierung des Vertriebs und der Werbung von Arzneimitteln

Zusammenfassung Länder der Dritten Welt sind für multinationale Unternehmen auf dem Arzneimittelsektor ein bevorzugtes Objekt für Ausbeutung durch überhöhte Preise oder manipulatives Marketing. Der Autor, mit diesen Problemen an leitender Stelle persönlich vertraut, beschreibt Versuche in Sri Lanka, Mißbräuche ausländischer Unternehmen durch Errichtung einer staatlichen pharmazeutischen Gesellschaft (State Pharmaceuticals Corporation) zu bekämpfen.Das Unternehmen hat wesentliche Preisreduzierungen für Arzneimittel erreicht und sich an geänderte wirtschaftliche und politische Verhältnisse anpassen können. Werbung und Vertriebsmethoden werden neuerdings in Sri Lanka — wie in anderen Ländern der Dritten Welt — durch ein Gesetz von 1980 kontrolliert, das allerdings für homöopathische und ähnliche Produkte nicht gilt. In der Zukunft kommt es darauf an, den individuellen Patienten durch eine vorsichtigere Verschreibung von Arzneimitteln mehr Aufmerksamkeit zu widmen.

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D. C. Jayasuriya is Attorney-at-Law and Senior State Counsel. His address is 40/12, Swarnadisi Place off Koswatte Road, Nawala, Sri Lanka.     

Book Reviews

Mohamed Ariff and Hal Hill, Export-Oriented Industrialisation: The ASEAN Experience, Sydney: Allen and Unwin, 1985, pp. 270. Aus$ 19.95

David Lim (ea.), ASEAN-Australian Trade in Manufactures, Melbourne: Longman Cheshire, 1985, pp. xii + 263

Kathryn May Robinson, Stepchildren of Progress: The Political Economy of Development in an Indonesian Mining Town, Albany: State University of New York Press, 1986, pp. xvi + 315.

Gillian Hart, Power, Labor and Livelihood: Processes of Change in Rural Java, Berkeley: University of California Press, 1986, pp. xvi + 228. US$ 30.00

Walter P. Falcon, William O. Jones, Scott R. Pearson and others, The Cassava Economy of Java, Stanford: Stanford University Press, 1984, pp.xvii + 212. $US 38.50.

Randolph Barker, Robert W. Herdt with Beth Rose, TheRice Economy of Asia, Washington, D.C.: Resources for the Future, 1985, pp. xx + 324 $US 30 (hardcover), $US 12 (paper).

C.W. Watson, Kerinci: Two Historical Studies, Canterbury: University of Kent, Centre of South-cast Asian Studies Occasional Paper No.3, 1984, pp.63.

Asia Pacific Report: Trends, Issues, Challenges, Honolulu: East-West Center, University of Hawaii, 1986, pp. x + 104.

B.L. Greenshields and M.A. Bellamy (eds), Rural Development, Growth and Inequity, International Association of Agricultural Economists Occasional Paper No. 3, Aldershot: Gower, 1983, pp.viii + 312.

Masami Mizuno, Population Pressure and Peasant Occupations in Rural Central Java, Canterbury: University of Kent, Centre of South-east Asian Studies Occasional Paper No. 4, 1985, pp.71.     

Financial markets and economic performances: Empirical evidence from five industrialized economies

This paper investigates the nature of the links between the development of financial markets and economic performances in five advanced economies. The vector error correction model (VECM) establishes the quantitative importance of long-run relationships among three financial variables and the real output. Granger's causality test then suggests short-run causality between financial markets and the real sector as well as the substitution effect of the individual sectors in the financial market of each country. The results support the supply-leading hypothesis that the development of financial markets spurs growth for all countries except for Canada. The demand-driven hypothesis is confirmed for Canada only in the short run.